Table Of Content«
Private Pensions Series
Regulating
Private Pension
Schemes
TRENDS AND CHALLENGES
No. 4
Private Pensions Series
Regulating Private
Pension Schemes
TRENDS AND CHALLENGES
No. 4
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
ORGANISATION FOR ECONOMIC CO-OPERATION
AND DEVELOPMENT
Pursuant to Article 1 of the Convention signed in Paris on 14th December 1960,
and which came into force on 30th September 1961, the Organisation for Economic
Co-operation and Development (OECD) shall promote policies designed:
– to achieve the highest sustainable economic growth and employment and a
rising standard of living in Member countries, while maintaining financial
stability, and thus to contribute to the development of the world economy;
– to contribute to sound economic expansion in Member as well as non-member
countries in the process of economic development; and
– to contribute to the expansion of world trade on a multilateral, non-
discriminatory basis in accordance with international obligations.
The original Member countries of the OECD are Austria, Belgium, Canada,
Denmark, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the United
Kingdom and the United States. The following countries became Members
subsequently through accession at the dates indicated hereafter: Japan
(28th April 1964), Finland (28th January 1969), Australia (7th June 1971), New
Zealand (29th May 1973), Mexico (18th May 1994), the Czech Republic
(21stDecember1995), Hungary (7th May 1996), Poland (22ndNovember1996),
Korea (12th December 1996) and the Slovak Republic (14th December2000). The
Commission of the European Communities takes part in the work of the OECD
(Article 13 of the OECD Convention).
© OECD 2002
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FOREWORD
The First Conference of the International Network of Pensions Regulators and Supervisors
(INPRS) was held on 23-26 April 2001 in Sofia, Bulgaria, and comprised: (1) the
Regional Conference on Private Pensions in Central and Eastern European Countries and
the New Independent States; (2) the Workshop on Pension Reform in the Baltic States;
and (3) the Research Network of the INPRS. This First INPRS Conference, organised
under the aegis of the OECD Centre for Co-operation with Non-Members, was hosted by
the Ministry of Labour and Social Policy of Bulgaria, and sponsored by the OECD,
USAID, the East-West Management Institute and Watson Wyatt.
The International Network of Pensions Regulators and Supervisors was established by
the representatives of pension regulatory and supervisory authorities from OECD
Member and non-member countries on the occasion of the OECD Forum on Private
Pensions organised in Prague, Czech Republic, in April 2000.
The conference provided a unique forum for an exchange of experience and expertise
on major policy issues crucial to private pension reform and the development of good
practices and policy recommendations for private pension schemes. Major outputs
included: (1) the endorsement by the INPRS members of the OECD Fifteen Basic
Principles for the regulation of private occupational schemes, which provide general
guidelines for developing an appropriate regulatory regime for private occupational
pensions; and (2) approval of the Programme of Work and Structure of the INPRS.
The present volume of the Private Pensions Series contains selected papers from the
INPRS Conference and consists of five parts: Part 1 presents recent developments in
private pension systems in the OECD area and in Asia; Part 2 looks at the interaction of
public and private schemes in structural pension reform; Part 3 focuses on the regulatory
treatment of occupational pension schemes; Part 4 describes supervisory regimes in
selected OECD and non-OECD countries; while Part 5 is devoted to consumer protection
issues, namely disclosure and education policies, and distribution practices.
This publication has been prepared in Private Pensions and Insurance Unit of the
Directorate for Financial, Fiscal and Enterprise Affairs by Juan Yermo and Nina
Paklina, with the technical co-operation of Edward Smiley and Louise Hallum.
The views expressed in this publication are the sole responsibility of the authors and do
not necessarily reflect those of the OECD or its Member governments. The book is
published on the responsibility of the Secretary-General of the OECD.
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TABLE OF CONTENTS
PART 1- DEVELOPMENT OF PRIVATE PENSION SYSTEMS IN SELECTED COUNTRIES
EXPERIENCE AND TRENDS IN OCCUPATIONAL PENSIONS - TOUR D’HORIZON
IN OECD COUNTRIES.......................................................................................................9
by Chris Daykin
THE HUNGARIAN PENSION REFORM IN PERSPECTIVE – IS IT ALREADY
REACHING PUBERTY?.....................................................................................................27
by Zoltan Vajda
THE EVOLUTION OF PUBLIC AND PRIVATE INSURANCE IN SWEDEN IN THE 1990’S......37
by Edward Palmer
PRIVATE PENSIONS IN ASIA: AN ASSESSMENTOF EIGHT SYSTEMS.................................51
by Mukul Asher
PART 2 - PUBLIC AND PRIVATE PENSION SYSTEMS INTERACTION
PUBLIC-PRIVATE INTERACTION IN STRUCTURAL PENSION REFORM...............................105
by Dr. Katharina Müller
THE RELATIONS BETWEEN THE PUBLIC AND PRIVATE PENSION INSURANCE SYSTEMS:
THE BULGARIAN AND FOREIGN EXPERIENCE................................................................117
by Jordan Hristoskov
PART 3 REGULATION OF PENSION FUNDS
TRENDS AND CHALLENGES IN PENSION PROVISION AND REGULATION........................125
by Chris Daykin
REGULATION OF OCCUPATIONAL PENSION SCHEMES IN IRELAND................................137
by Mary Hutch
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DESIGN AND MANAGEMENT OF OCCUPATIONAL DEFINED CONTRIBUTION PENSION
SCHEMES: LESSONS FROM THE ADMINISTRATIVE COST LITERATURE..........................151
by Hazel Bateman
EMPLOYER PROVIDED PENSIONS PORTABILITY IN OECD COUNTRIES. COUNTRY
SPECIFIC POLICIES AND THEIR LABOUR MARKET EFFECTS..........................................169
by Vincenzo Andrietti
PART 4 – PRIVATE PENSION SUPERVISION
MANAGEMENT OF SUPPLEMENTARY PENSION INSURANCE IN BULGARIA:
TRENDS AND ISSUES.....................................................................................................233
by Nikola Abadzhiev, Ph.D.
STRUCTURE OF THE SUPERVISION.................................................................................245
by Tibor Parniczky
SUPERVISION OF PRIVATE PENSIONS – AN AUSTRALIAN PERSPECTIVE........................255
by Keith Chapman
POLISH MODEL SUPERVISION OF PENSION FUNDS........................................................261
by Pawel Pelc
PART 5 – CONSUMER PROTECTION
DISTRIBUTION AND PRIVATE PENSIONS: LESSONS FROM
THE UNITED KINGDOM EXPERIENCE.............................................................................269
by Frank Fletcher and J. Michael Orszag
DISCLOSURE TO MEMBERS: PRINCIPLES AND HUNGARIAN EXPERIENCES....................279
by Mihaly Erdos
PENSIONS, CONSUMER FINANCIAL LITERACY AND PUBLIC EDUCATION:
LESSONS FROM THE UNITED KINGDOM........................................................................289
by Edward Whitehouse
ANNEX Summary Record of the INPRS Conference on Private Pensions...............315
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PART 1 - DEVELOPMENT OF PRIVATE PENSION SYSTEMS IN SELECTED COUNTRIES
7
Experience and Trends in Occupational Pensions - Tour d’Horizon
in OECD Countries
by
Chris Daykin
Government Actuary
United Kingdom
1. Introduction
One of the most important elements of recent pension reform proposals internationally has
been an increased role for funded complementary pension arrangements. They are needed
to take some of the pressure off demands for maintaining PAYG social security schemes
with unaffordable levels of benefit. They are also seen as creating new savings and
investment which could play an important role in the development of the economy and
perhaps even enhance the prospects for economic growth. However, economists are
divided as to whether the expansion of funded complementary schemes will necessarily
increase saving, or simply substitute for other savings. Additional monies for investment,
moreover, will not automatically generate economic growth unless they are utilised
productively. Otherwise they may simply force up prices in stock markets. Nevertheless, it
is widely believed that increasing the level of funding will assist economic growth,
particularly in emerging markets or markets in transition, if the introduction of
complementary schemes is co-ordinated well with capital market development.
The switch from pay-as-you-go to funded provision does not automatically solve the
problems of demographic ageing. The resources needed to support a growing elderly
population will still need to be generated by an economy with a declining number of
people at working ages. Wealth can only be transferred to a limited extent over time by
investing, although ownership of assets does create a claim on the future resources of
the economy. It may well be that such a market mechanism will achieve the transfers of
resources necessary to support the elderly more smoothly than direct transfer payments
(tax or social security contributions). If the additional investment does increase the
economic growth, the size of the economic “cake” to be divided up will be greater, and
if so the transfer of resources to the elderly will be more affordable and perhaps easier
to effect.
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